We came across a bullish thesis on The Progressive Corporation on CompoundingLab’s Substack. In this article, we will summarize the bulls’ thesis on PGR. The Progressive Corporation’s share was trading at $205.54 as of February 4th. PGR’s trailing and forward P/E were 10.45 and 12.56, respectively according to Yahoo Finance.
The Progressive Corporation operates as an insurance company in the United States. PGR appears undervalued, presenting a compelling investment opportunity with potential for significant upside. Based on a dividend discount model, cross-checked with a terminal P/E multiple, the stock seems roughly 25% below fair value, implying an expected annual alpha of around 10% if it converges to fair value over the next three years.
The investment case is supported by Progressive’s strong fundamentals, including a long-term EPS growth assumption of 4%, a structurally high ROE of 32%, and a reasonable cost of equity of 6.5%, with a P/E exit multiple of 14.8x. Progressive is the second-largest U.S. auto insurer by market share, trailing only private competitor State Farm, and boasts the highest 10-year average ROA among listed property and casualty insurers at 5.68%.
Its core competitive advantage lies in data-driven underwriting and pricing at unmatched scale, which continues to support robust profitability even after a recent EPS miss. Sensitivity analysis indicates that across a wide range of reasonable assumptions, the stock remains undervalued, with even conservative scenarios suggesting a 6% annual alpha, highlighting the low downside risk. This combination of structural profitability, durable moat, and favorable valuation underpins a high-confidence investment thesis.
Given the current price, initiating a position now offers both an attractive entry point and the potential for incremental gains as the market recognizes Progressive’s intrinsic value, with the option to scale the position on weakness. Overall, Progressive represents a high-quality, underappreciated insurer with steady growth, exceptional returns on capital, and a rare risk/reward profile among large-cap P&C stocks.
Previously, we covered a bullish thesis on The Progressive Corporation (PGR) by Charly AI in April 2025, which highlighted the company’s strong financial performance, improving profit margins, technological innovation, and undervaluation based on discounted cash flow analysis. PGR’s stock price has depreciated by 21.06% since our coverage. CompoundingLab shares a similar perspective but emphasizes a valuation-driven approach, highlighting a 25% undervaluation and potential annual alpha of 10% over the next three years.
